Editorial

Partners pay their fair share

One of the five priorities of the Whistler 2020 plan is
Partnering for Success.

On Monday a majority of Whistler council interpreted Partnering
for Success to include giving Whistler-Blackcomb a tax break of up to $200,000
annually for five years. The tax break was requested for the $51 million Peak
to Peak gondola that Whistler-Blackcomb has proposed. The mayor suggested that
to not grant the tax exemption would have jeopardized the municipality’s
relationship with Whistler-Blackcomb.

Whistler-Blackcomb is, of course, critically important to
Whistler the resort and Whistler the community. The success of
Whistler-Blackcomb goes a long way toward determining the success of everyone
else in Whistler. When the company decides it wants to invest more than $50
million in a lift that will add to the year-round visitor experience, that is a
positive sign for the whole community. And Whistler is fortunate that people
like Hugh Smythe, Dave Brownlie and Doug Forseth, senior people at Whistler-Blackcomb
and parent company Intrawest, not only live in Whistler but care deeply about
the community.

But for the municipality, which lobbied for nearly a decade for
additional streams of revenue, to forego $1 million in taxes over five years
from one of its partners is wrong. Whistler-Blackcomb isn’t the only partner
Whistler has.

The municipality can offer the tax break under recent
amendments to the Community Charter, which permit exemptions up to five years
to companies undertaking major improvements. The motivation for the amendment
was driven by the idea that companies need encouragement to reinvest in major
improvements. It may also stem from a general feeling among the business
community, the B.C. Chamber of Commerce and others that too often local
governments have lived high off the hog of one primary business or industry,
hitting that industry with exorbitant taxes. That is not the case here.

When the Peak to Peak gondola proposal first surfaced 18 months
ago there was no suggestion, at least in public, that Whistler-Blackcomb needed
a break on taxes to make it happen. The company was looking for a joint venture
partner to make the project a reality. That Whistler-Blackcomb now appears to
be able to finance the project almost entirely on its own is good news. But the
thinking seems to be: since the Community Charter has been changed why not see
if we can get a tax break?

While Partnering for Success is one of Whistler’s five
priorities, Whistler also needs to recognize that its partners’ interests are
not always identical to Whistler’s interests. To repeat, Whistler is fortunate
to have Whistler-Blackcomb and its senior staff as partners. But management of
Whistler-Blackcomb also has to report to parent companies whose interests and
priorities are not necessarily the same as Whistler’s. Some recent actions
suggest where those priorities may lie.

Intrawest laid off 150 employees last month while at the same
time giving responsibility for all Canadian and U.S. mountain resorts to two
senior managers, Brownlie and David Barry. Is this a move to create greater
efficiencies and reward outstanding managers, a sign of trying to squeeze more
from less, or a bit of both?

Intrawest, of course, is now a private company, owned by
Fortress Investments. There are five principals in Fortress, Wesley Edens,
Peter Briger, Robert Kauffman, Randal Nardone and Michael Novogratz, and as
TheStreet.com columnist Brett Arends outlined in a Feb. 28 column entitled
Plundered Fortress (
http://www.thestreet.com/_tscs/funds/investing/10341308.html
),
making money is the priority for these five men. Between January 2005 and last
month, when 8.6 per cent of Fortress was offered publicly, the five principals
cashed out $1.04 billion. That doesn’t include the $888 million they made by
selling a stake in Fortress to Japanese bank Nomura.

Arends wrote: “By the time the owners opened the doors to the
investing public this month, the company wasn’t just out of cash — it had
negative book value. Liabilities actually exceeded assets by $507 million.”

The money raised in the IPO made up for that cash shortfall,
but the five principals are also in line to claim 85 per cent of future tax
benefits to Fortress Investments. In cash. That could be billions more.

As Arends also points out: “Edens and his partners have done
nothing illegal. Let’s even go as far as saying they did nothing unethical.”

Whistler-Blackcomb’s tax break is many levels removed from Wall
Street and the New York financial world of Fortress Investments. But in
agreeing to waive taxes, who is Whistler partnering with, Hugh and Dave and
Doug or Wesley, Peter, Robert, Randal and Michael?